By Lorraine Mirabella, The Baltimore SunKnight Ridder/Tribune Business News

Jul.
28, 2005 - The developer of Baltimore's Ritz-Carlton Residences
yesterday sued Edward V. Giannasca II, its Baltimore partner who
shepherded the Inner Harbor project for the past five years, for fraud
and breach of contract.

Midtown Baltimore LLC, developer of the
$250 million luxury condos under construction at the foot of Federal
Hill, filed the nine-count complaint in U.S. District Court in
Baltimore, marking the latest tangle in a project long dogged by
financial and legal disputes.

Jack Cayre, senior vice president
of Midtown Baltimore, said he took over Giannasca's duties as
day-to-day manager of the project on July 11, when Midtown terminated
Giannasca.

Giannasca did not return phone calls yesterday.

The
developer still expects to meet a mid-2007 completion date for the
first-of-its-kind residential project for the Chevy Chase-based
Ritz-Carlton Hotel Co., manager of Ritz properties, Cayre said.

"We
are very much committed to this project," said Cayre, noting that the
developer and its parent company, New York-based Midtown Equities LLC
"are prepared to spend any resources necessary to deliver the most
magnificent project that Baltimore has ever seen."

About half
of the Ritz's 178 condos have sold, with units priced from $1.9 million
to $2.2 million the best sellers so far, Cayre said. Condos are priced
up to $5 million. He said the first phase of construction, including
putting in bulkheads, is nearing completion. The second phase,
including excavation and foundations, should start after Labor Day, he
said.

Giannasca, who had taken over the Ritz project in 2000
after an initial partnership fell through, brought Midtown Equities in
as an investor in 2002. He became an employee of Midtown Baltimore,
Cayre said.

Midtown had reached an agreement with Giannasca
stipulating "if he committed 100 percent of his effort (to the Ritz),
we would give him 10 percent in profits of the project once it was
done," Cayre said.

The complaint, which seeks more than $20
million in damages, claims Giannasca defrauded Midtown by spending time
developing a New Orleans condo project rather than working full-time on
overseeing sales, marketing and construction of the Ritz. Giannasca
used Midtown's employees' time, computers, designs and consultants to
work on the New Orleans project, the complaint charges.

The
suit says that Midtown representatives became concerned early this year
that Giannasca was not devoting his full attention to the project and
was lying about frequent trips to New Orleans on work time. Cayre
repeatedly confronted Giannasca about devoting substantial time and
energy to a $100 million project in New Orleans to convert a high-rise
apartment building into condos, the lawsuit says.

"When
confronted with his wrongdoing, Giannasca attempted to cover up his
fraud and self-dealing through a consistent pattern of egregious
misconduct including lying and destroying evidence," the complaint
says.

The Ritz, originally envisioned as an upscale hotel, was
first planned by Florida developer Stuart C. "Neil" Fisher on its
current site, an abandoned Bethlehem Steel propeller yard on Key
Highway. Fisher stepped aside as the developer in January 2000 after
news surfaced that he had no apparent assets, was refusing to pay a
fraud judgment, and past developments ended in lawsuits and
bankruptcies.

Some of Midtown's complaint focuses on Giannasca's alleged continued involvement with Fisher.

In
February, after Giannasca returned from a New Orleans trip, "Mr. Cayre
reiterated to Giannasca how crucial it was that... Giannasca have no
contact or association with Fisher because the project [the Ritz] had
experienced certain problems due to Fisher's prior involvement in the
project," according to the complaint. It says Giannasca gave Fisher a
power of attorney to act on his behalf on the New Orleans project..

Midtown
has invested about $45 million so far in the Ritz project, which in
addition to the condos includes a 22-slip marina, private movie
theater, gourmet restaurant and spa.

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